Property Pitfalls

Top tips on avoiding legal complications

By Oscar Ricor (Ricor Abogados). In all markets there are people who play by the rules and those who break them. The rapid explosion in the Spanish property market over the last decade and the arrival of many foreign purchasers both attracted a fair amount of sharks.

Before starting, I do need to emphasise that Spain is mostly a well-regulated country and not the “wild west”. There are of course agencies, property developers and construction companies that operate legally and properly.

Spain remains a top destination for people buying holiday homes or wanting to retire in the sun and there is no reason you can´t safely purchase property and have your rights protected.

Over the years I have been in practice as a lawyer, I have had first-hand experience of most of the different scams and tricks that are used by the dishonest operators in the construction and property development businesses.

Expatriates usually are at a disadvantage when it comes to knowing the language and/or much about Spanish property law. Additionally, many older people – especially the old and infirm – are more vulnerable as the may be coerced into accepting a situation.

Common property purchase problems

The following are examples of some of the areas where people have had problems and things to watch out for when purchasing a property in Spain:

1) Private sale agreements: this situation might be suggested as a way to avoid tax or simply the buyer might not realise that what they are executing may not be legally valid. A sale should be recorded as a public deed in the presence of a notary. The risk here is that the seller, sells the property again to another party.

2) Incorrect description of the property (fraud): this ranges from the misreporting of the number of square metres of the property itself to incorrect inventories of fixtures and fittings.

3) The introduction of a third-party into a transaction who acts as an intermediary between the owner of the property and the legally registered owner, who sells the property – usually under private agreement, with the issues raised above – and raises the sale price by 33-55%.

4) The sale of property built on agricultural or other land which has been constructed in violation of building regulations and/or in the absence of the required permits and/or on land which is then re-categorised as an urban area. In the first case, it is possible such a property can be ordered to be demolished and in the second, the “land grab” law can be applied to expropriate land for road/other use.

5) The sale of properties that does not have the certificate of occupancy or licence of first or second occupation, which might be due to the fact it has not been constructed with the necessary permissions and is not recognized by the local authorities.

6) The sale of off-plan properties (advance sales of a property in advance of its construction or completion)without there being refund insurance in place to protect deposits (illegal under Spanish law).

7) The sale of new properties which do not have three- or ten-year insurance in place to cover damages caused by hidden defects in the construction.

8) Charging for temporary (builder´s) electricity supplies which are only meant to be used during the construction period (illegal under Spanish law).

9) Sales in the presence of a notary through a “verbal representative” or “translator” provided and sent by the selling developer/builder to represent you as the buyer. As you might imagine this type of situation is open to abuse as this representative can act in the interests of the seller and not yours.

Advice when buying property in Spain

1) Don´t fully trust any developer or estate agent. Part of the job is appearing trustworthy, being friendly and helping in every way they can as you consider buying a property from them. This co-operation is there to close a sale and ensure they get their commission; it often disappears completely when the deal is done.
It comes as a shock to many people that their “new best friend” does not care about any problems you now have with the property or transaction.

2) Don´t be pressured into making a deposit on a property until a lawyer has been able to make a full evaluation of the legal status of it (enquiries with a Notary, Land Registry and the local town hall, etc).

3) Don´t sign any documents or purchase contracts before having them checked by an independent solicitor (that you have contacted yourself, not a referral from the seller). 90% of contracts of the contracts drawn up by developers that we have seen include unacceptable clauses, which range from unpleasant to expensive/abusive.

Even if you have a good grasp of Spanish, some of these are not immediately obvious without good knowledge of Spanish law.
The best advice I can give is to make sure you fully understand everything you are being explained. You might feel uncomfortable or ignorant at times, but ask for clarification and get things in writing. Given the significant amount of your wealth you invest when you buy a property, make sure you protect that by always seeking third party independent advice from an expert.
Professional help avoids complications and is relatively inexpensive. Sitting back in the sun in your new home in Spain without any legal worries is priceless…